Concurring Opinions » Stipulated Damages, Exculpatory Clauses and Unconscionability

Concurring Opinions » Stipulated Damages, Exculpatory Clauses and Unconscionability:
by Dave Hoffman
On re-reading Discover Bank v. Superior Court (Cal. 2005) I found myself getting hung up on a conceptual problem you might be able to help me with. The Discover Bank court considered the validity of class action arbitration waivers. Holding such waivers unconscionable as a matter of law, the court halted (that is, until Concepcion) arbitration’s inexorable conquest of consumer litigation. 

 The court reasoned was that such waivers presented issues of both procedural and substantive unconscionability. Procedural, the waivers were default-forcing “bill stuffers” and consequently not meaningfully chosen. Substantively, “they may operate effectively as exculpatory contract clauses . . . because . . . damages in consumer cases are often small . . and the class action is often the only effective way to halt and redress [wrongdoing.]“ The question I have is what distinguishes “exculpatory clauses” – typically thought to be against public policy – from ordinary “stipulated damages” clauses, which are subject to reasonableness review. I unaware of any scholarship that tries to define exactly what stipulated damages are (and are not). 


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